Shell Group marks 100th year in PH

Jan 06, 2014

As early as 1897, the Royal Dutch Shell group already saw great potential in the Philippines.

By Tina Arceo-Dumlao

Philippine Daily Inquirer

9:58 pm - Sunday, January 5th, 2014

This thinking has not changed despite the turbulence following the Filipinos’ bitter struggle against colonial rule—first against the Spaniards and then the Americans and Japanese—the utter devastation caused by World War II and the costly political and economic upheavals that the Philippines has gone through since the bright red cans of kerosene bearing the Shell trademark first arrived in the Philippines.

And for the Royal Dutch Shell group, the best is yet to come for its operations in the Philippines, considered one of the most notable markets in Asia, where the billion-dollar multinational first established a major presence in the energy sector and where it is pinning its hopes for future growth.

According to Edgar O. Chua, country chair of Shell Companies in the Philippines, the country is becoming an even more important market due to its rapid economic growth and increasing young population, which augur well for its different businesses in the Philippines that include petroleum refining and distribution and natural gas production.

The 57-year-old Chua tells BusinessMonday that the Royal Dutch Shell Group has been consciously “rebalancing” its portfolio over the past five years, moving from West to East, because growth for the company will come from this large and developing continent, and Shell has every intention of taking part in that spectacular rise.

Shell thus is going full circle as the company was born in Asia, a result of a joint venture between a Dutch company that struck oil in Indonesia and a British company that was, among others, into the export of seashells from the East to the West.

The Philippines stands to benefit greatly from that rebalancing of the group’s billion-dollar portfolio with big-ticket projects coming out of the group’s pipeline.

Shell Companies in the Philippines, for example, is investing about P6 billion to put up its first import terminal facility in Northern Mindanao and is looking to upgrade its 110,000-barrel-per-day petroleum refinery in Batangas as it wants to be a “major participant in the country’s growth and development.”

Shell and its partners are also investing around $1 billion in the continued expansion of the Malampaya natural gas field off northwest Palawan. It is also studying the feasibility of building a terminal for liquefied natural gas and increasing the manpower complement of its Shared Service Center in Manila by at least another 1,500 employees to total 4,500.

Indeed, the Shell Group in the Philippines has come a long way from its humble beginnings in the late 1890s when it attempted to muscle in on the territory of the former American oil giant Standard Oil and sell kerosene, which was then the main fuel for lighting and cooking.

“There was a lot of reconstruction at that time and Shell saw that as an opportunity. Those were interesting times,” says Chua.

Trading was so good that the group led by British trader Marcus Samuel, considered the father of the Royal Dutch/Shell group of companies, decided to establish a corporate presence in the Philippines on Jan. 10, 1914 through Asiatic Petroleum Co. (Philippine Islands) Ltd. From there, the Shell group has become a major player in the country’s growing energy sector, accounting for about 30 percent of the petroleum distribution industry. The natural gas from its landmark Malampaya field now also fuels 30 percent of the power supply in the Philippines.

Chua says the Shell group is committed to continue scanning the horizon for more opportunities in the Philippines, and that commitment to nation-building will not be shaken by setbacks and challenges that are par for the course for any growing economy.

“We will continue to be a major player in the next 100 years. We have always taken a long-term view. If you look at the challenges—more recent ones will be martial law, the Asian currency crisis and the global financial crisis—companies with less of a long-term view would have left. But we stayed because, while others saw reasons to consolidate and withdraw, we saw as temporary setbacks. We will continue to invest because Shell believes in the long-term growth of the country,” says Chua, named Management Man of the Year in 2013.

He adds that the Philippine team has also been able to consistently demonstrate its ability to rise to the occasion and to perform well under pressure.

Chua recalls the difficulties surrounding the development of the Malampaya natural gas field, which required the management of “a lot of moving parts.” Not only was it a challenge to extract the gas from deep water, but it was also equally daunting to develop the power plants that will convert the natural gas into electricity and contribute to reducing the country’s carbon footprint.

Chua says the company also had to develop the multibillion-dollar field with a conscious effort to reduce its environmental impact, such that pipelines had to be lengthened at great cost to bypass vital marine flora and fauna. The company also engaged closely with local government units and indigenous peoples who will be affected by the development of the Malampaya natural gas field, which is now recognized globally as a model for sustainability.

More importantly for the Philippines, the commissioning of the power plants in Batangas using natural gas marked the birth of the country’s natural gas industry and represented a major step in the country’s quest for energy self-sufficiency.

But of all of the projects in the Philippines, Chua says he gets the most personal fulfillment from the establishment of the Shared Services Center in the Philippines, which fills global requirements in such areas as human resources, finance and analysis.

“At the moment we have 3,000, with a little over 2,000 in finance and then 500 in the call center. We also have 200 doing procurement. We also have a group doing expatriation services, processing and handling the transfer of people. I am very proud of them. When I retire, I will consider this one of my most memorable projects,” says Chua, who joined Shell in 1979 as part of the sales team and then worked his way up to become chairman.

The quality of the local workforce is also seen in the operational performance of the refinery in Tabangao, Batangas, which always comes on top when measured in terms of reliability and safety. This contributed to the decision to keep the refinery alive in the Philippines while others in the region are being shut down or sold. An upgrade is also in the works to enable Shell to produce a new line of petroleum products that will conform with stricter environmental standards.

And as the group invests cold cash in infrastructure development, Shell is as committed to invest in the social development, as part of its vision to be an ideal corporate citizen in the communities where it operates.

Shell constantly aims to address social concerns and works to benefit local communities, in an attempt to uphold its positive reputation as it does business.

“The social commitment is there, especially in capacity building and education. We want to invest specifically in science and technology not only for our own needs but also for the country. We cannot just be a service-oriented economy. We need scientists and engineers to support infrastructure and new types of industries. Innovation will carry us into the future,” says Chua.